Rent seeking by lobbying for government favors is generally thought to be wasteful. In view of this wastefulness, it is puzzling that rent seeking by corporations has not been criticized as a failure to be socially responsible or even as an unethical business practice. This article examines the compatibility of rent seeking with corporate social responsibility by utilizing Thomas Dunfee's idea of a marketplace with morality. This idea is useful for solving this puzzle because (...) in considering whether rent seeking is compatible with corporate social responsibility, it is necessary, first, to define rent seeking, which this article argues is a normative concept, and, second, to find some principled way of identifying rent-seeking behavior. It also solves the puzzle about rent seeking by revealing that the concept of rent seeking itself is of little use in determining whether certain conduct is or is not socially responsible since rent seeking activity cannot be identified without first evaluating which activity is rent seeking. (shrink)

Whenever you have a situation in which a person or group is in power over a community, some in the community will seek to obtain special favors at the expense of all others in the community. We are all familiar with this situation from our school days where some students would seek special favors -- like a high grade -- at the expense of the other students. Such behavior in the political/economic world is called..

The concept of economic rent is among the oldest in political economy. This reflects the fact that economies have always included parties whose income appears more parasitic than productive. The concept of rent-seeking refers to the efforts of parties seeking to secure such income by way of gaining influence over economic regulation or otherwise gaining favors from government. In spite of its intuitiveness, however, it has proven difficult to precisely distinguish rent from other categories of (...) income. This chapter seeks to acquaint readers with this problem. The privatization of incarceration is then supplied as an important case study in current rent-seeking behavior. (shrink)

In a number of works, James M. Buchanan set out a proposal for a ‘demogrant’— a form of universal basic income that applied the principles of generality and non discrimination to the tax and the transfer sides of the scheme and was to be implemented as a constitutional rule outside the realm of day-to-day politics. The demogrant has received surprisingly little scholarly attention, but this article locates it in Buchanan’s broader constitutional political economy project and shows it was a logical (...) application of his theoretical framework to the problem of inefficient and unfair welfare systems when reform to the basic institutions of majoritarian democracy was not forthcoming. The demogrant aims to end the problems of majority cycling and rent seeking that plague contemporary welfare states and therefore offers a model of welfare without rent seeking—a constitutional welfare state. We compare Buchanan’s demogrant model to other universal basic income and negative income tax models and consider the most important criticisms. We conclude that rescuing the demogrant model from relative obscurity would be a fruitful future task of applied constitutional political economy and public choice. (shrink)

The market for kidneys offers a case study of Baptists and Bootleggers. In almost every country, sales are currently illegal and donated organs are allocated by a central planner. Thousands of people die every year, because of the shortage caused by the absence of markets. This paper starts by examining the free-market alternative, and shows that a market would solve the shortage. It then uses gains-from-trade analysis to explain why current vested interests oppose a move to a market, despite the (...) immense potential for saved lives. In a shift to a market, gains from trade would be distributed away from lucky patients and various industries that benefit from the shortage ; these “Bootleggers” form an alliance with “Baptists”. (shrink)

Agribusiness corporations primarily involved in providing livestock feed—colloquially known as the “ABCD” (Archer Daniels Midland (ADM), Bunge, Cargill, and the Louis Dreyfus Company)—have begun to enter the fishing industry around the world. I argue that this recent entry of agribusiness multinationals in aquaculture, focusing particularly on Cargill, arises to take advantage of strategic opportunities to proliferate, or create links with respect to feed production and development within value chains. Concerning such opportunities, as I document, Cargill first leveraged its access to (...) cheap, overproduced grains in the 1990s, developing ways to insert corn and soy into what it calls “aquafeed.” Next, the multinational firm began proliferating links within fishing industry value chains in the form of introducing new technical assistance services, as well as creating feed supplements and additives. As I explain, these efforts to proliferate links in the supply chain exist as opportunities to charge rents, or surplus profits, which is possible because Cargill retains the right to control the new products and services. An additional link in the chain includes how the corporation has expanded its role in the global food system from its past as an intermediary, to engaging consumers in direct ways by attempting to create their preferences. I conduct my analysis of Cargill’s corporate strategy by focusing on reporting from the fishing industry publication, Aquafeed News, detailing developments from 2000 through 2023. (shrink)

The distributive justice literature has recently formulated several tax proposals, with limitarians or property-owning democrats proposing new or higher taxes on wealth or capital income intended to decrease the growing wealth gap. This essay joins this debate on inequality and redistributive taxation through the lens of the “benefit principle for public policy.” This principle says that specific rules and institutions are acceptable to the extent that they create benefits for all individuals in society, or at least don’t make anyone worse (...) off. This benefit principle opposes wealth accumulation to the extent that wealth was generated through rent-seeking—that is, income unrelated to economic productivity, which is not embedded in mutually beneficial exchanges. I maintain, however, that ruling out rent-seeking requires not ex post taxation, but primarily a more “predistributive corrective policy,” that is, reconfiguration of market institutions to prevent wealth accumulation through rent-seeking in the first place. The alternative response is, thus, not to tackle inequality as such but to reform the market to promote the occurrence of mutually beneficial exchange. (shrink)

This article examines how corporate social responsibility (CSR) can serve as an external source of rents for governments that depend on foreign financing for state-building and development. The strategic, instrumental use of CSR has been overlooked in previous research on governments and CSR, especially in the Global South. To understand how CSR can serve as a lever for rents, the concept of “extraversion” is introduced to describe the way in which rent-seeking African governments instrumentalize their asymmetric external relations (...) for political and private benefit. The connection between CSR and rent-seeking is analyzed through a case study of large gas investments in Tanzania. The article finds that the government has set up regulation that enables local and central government authorities to appropriate, mediate, reclaim, or possibly trick CSR practices to gain rents. Based on the study, two contributions are made to the literature on CSR and governments. First, the instrumental use of CSR in the Global South is added to the variety of perspectives that can be taken when studying government agency. Second, CSR is conceptualized as a potential stream of rents for governments to exploit. The article ends with discussing that the outcome of CSR in a rent-seeking environment depends on whether the leveraged resources are managed well to support peaceful and locally beneficial economic development or whether they serve private accumulation through corruption. (shrink)

Mankind soon learn to make interested uses of every right and power which they possess, or may assume. The public money and public liberty...will soon be discovered to be sources of wealth and dominion to those who hold them; distinguished, too, by this tempting circumstance, that they are the instrument, as well as the object of acquisition. With money we will get men, said Caesar, and with men we will get money. Nor should our assembly be deluded by the integrity (...) of their own purposes, and conclude that these unlimited powers will never be abused, because themselves are not disposed to abuse them. They should look forward to a time, and that not a distant one, when a corruption in this, as in the country from which we derive our origin, will have seized the heads of government, and be spread by them through the body of the people; when they will purchase the voices of the people, and make them pay the price. (shrink)

This article provides an account of rent-seeking in relation both to economic policies and political practices in South Africa. The article draws attention to continuities and similarities in this regard between the two distinct periods of nationalist rule from 1948 to 1994 and from 1994 to 2012. The economic dimensions that are specifically addressed are industrial policy, the labour market, state administration and tenders and service delivery and welfare. The more specifically political dimensions addressed include the electoral system, (...) the relationship between constitutionalism and the judiciary, and the rule of law. The article highlights the dangers posed by excessive rent-seeking and especially its negative implications for redistribution, economic growth and the consolidation of democracy in a highly unequal society. (shrink)

Joseph Heath lumps in quotas and protectionist measures with cartelization, taking advantage of information asymmetries, seeking a monopoly position, and so on, as all instances of behavior that can lead to market failures in his market failures approach to business ethics. The problem is that this kind of rent and rent seeking, when they fail to deliver desirable outcomes, are better described as government failure. I suggest that this means we will have to expand Heath’s framework (...) to a market and government failures approach. I then try to defuse objections that as a government failure, rent seeking may not appear relevant to what managers ought to do. Solving this conceptual issue will also give us an excuse to revisit a separate conceptual issue: the normatively thick conception of “rent” and rent seeking behavior that some use. This normatively thick conception is problematic, I argue, and I offer the beginnings of a novel, normatively neutral conception that is useful for our purposes in making the ethics of rent and rent seeking behavior more than a merely trivial exercise. (shrink)

Many public debates about the societal significance and impact of agriculture are usefully framed by Paul Thompson’s distinction between the “agrarian” and the “industrial vision.” The key argument of the present paper is that the ongoing debate between these visions goes beyond academic philosophy and has direct effects on the political economy of agriculture by influencing the scope of rent-seeking activities that are undertaken primarily in the name of the agrarian vision. The existence of rent-seeking activities (...) is shown to reflect the fact that the agrarian vision is not universally supported, which is certainly true of the industrial vision as well. The key argument of the present paper is that these two philosophical visions of agriculture are not radically incongruent. Rather, they share a common ground within which they are even mutually supportive. If agricultural policy making is oriented toward this common ground, it may reduce overall dissatisfaction with the resulting institutional regime of agricultural production. Such an agricultural policy may also stimulate the emergence of new business practices that not only enable efficient agricultural production but also minimize negative ecological impact and preserve cultural landscapes. (shrink)

This article examines the question of whether it is ethical for company officials to use the force of government to reduce or eliminate foreign competition, using the antidumping laws as a case study. This article begins with a brief examination of the U.S. antidumping laws and then examines several ethical questions related to the antidumping laws. The main question to be addressed is whether, and under what circumstances, it is ethical for domestic producers to ask government to launch an antidumping (...) investigation against a foreign competitor. Related questions to be examined include (1) Whether it is ethical to ask the government to launch an antidumping investigation even when the domestic company making the request knows that dumping has not occurred; (2) Whether it is ethical to ask for an antidumping investigation in cases where dumping (according to the definition of dumping) has occurred, where the effect is to help domestic producers at the expense of the general public. This article examines these questions by applying both utilitarian and non-utilitarian approaches. (shrink)

In this article, I develop the point that whereas talent is the basis for desert, talent itself is not meritocratically deserved. It is produced by three processes, none of which are meritocratic: talent is unequally distributed by the rigged lottery of birth, talent is defined in ways that favor some traits over others, and the market for talent is manipulated to maximally extract advantages by those who have more of it. To see how, we require a sociological perspective on economic (...) rent. I argue that talent is a major means through which people seek rent in modern-day capitalism. Talent today is what inherited land was to feudal societies; an unchallenged source of symbolic and economic rewards. Whereas God sanctified the aristocracy’s wealth, contemporary privilege is legitimated by meritocracy. Drawing on the work of Gary Becker, Pierre Bourdieu, and Jerome Karabel, I show how rent-seeking in modern societies has come to rely principally on rent-definition and creation. Inequality is produced by the ways in which talent is defined, institutionalized, and sustained by the moral deservingness we attribute to the accomplishments of talents. Consequently, today’s inequalities are as striking as ever, yet harder to challenge than ever before. (shrink)

Contemporary, technoscientific capitalism is characterized by the configuration of a range of “things” as assets or capitalized property. Accumulation strategies have changed as a result of this assetization process. Rather than entrepreneurial strategies based on commodity production, technoscientific capitalism is increasingly underpinned by rentiership or the appropriation of value through ownership and control rights, monopoly conditions, and regulatory or market devices and practices. While rentiership is often presented as a negative phenomenon in both neoclassical and Marxist political economy literatures—and much (...) in between—in this paper, I conceptualize rentiership as a technoeconomic practice and process framed by insights from science and technology studies. So, rather than a problematic “side effect” of capitalism, the concept of rentiership enables us to understand how different forms of value extraction constitute, and are constituted by, different forms of technoscience. This allows STS to contribute a distinctive analytical approach to ongoing debates in political economy about economic rents and rent-seeking. (shrink)

To Aaron Pacitti and Michael Cauvel–whose journal article, “Rent-Seeking Behavior and Economic Justice: A Classroom Exercise” broadly argues that “understanding the [complexities] of rent-seeking behavior helps fill the gap between economics and politics”–the varieties of rent are wide and, therefore, can only be described in their category-specific positions. I will discuss three of these categories in more detail below, but for now, I propose that a useful working grasp of economic rent involves “the amount (...) paid to the owner of a factor of production over the cost that is to be necessarily incurred on utilizing such elements in the production process.” In math terms, ‘economic rent’ equals the agreed-upon-amount paid by the consumer (when that amount far exceeds the market value of the product) minus the cost spent by the producer to make the product (when that cost is far below the typical amount to produce the product). Originally, the concept of economic rent concerned land ownership and the production of natural goods. Two major economists, Adam Smith and David Ricardo, offered insights into the general makeup and logic of what they called, the rent of land and simply rent, respectively. (shrink)

Using the arguments of Ludwig von Mises and Friedrich August von Hayek, I argue that private ownership solves the economic problem of corruption. Since private ownership discourages entrepreneurs from rent-seeking, and privately owned media provide objective and unbiased information to citizens, any legal reform establishing and enforcement of private ownership also solves the corruption problem.

Philosophers since Plato have questioned whether might makes right, and whether the weak are condemned perforce to suffer at the hands of strong, cunning, and ruthless elites and majorities. This essay argues that communicative and strategic uses of grievance, shame, “bullshit,” collective action, and economic rent seeking mitigate conventional forms of social might, thereby helping the weak and the few to prosper and flourish despite their inferior strength, numbers, and social status. The argument is supported empirically by macroeconomic (...) and ngram data. (shrink)

This paper represents an effort to distinguish between two types of guanxi prevalent in mainland China: favor-seeking guanxi that is culturally rooted and rent-seeking guanxi that is institutionally defined. Different rules of maneuvering the two types of guanxi are identified in light of Chinese cultural and business ethics. Strategies for entering guanxi in mainland China are also suggested.

This article analyzes rent seeking with multiple additive efforts for each of two players. Impact on rent seeking occurs even when a player exerts only one effort. This contrasts with models of multiplicative efforts with impact on rent seeking only when a player exerts all its available efforts. An analytical solution is developed when the contest intensities are below one, and equal to one for one effort. Then, additional efforts causing interior solutions give players (...) higher expected utilities and lower rent dissipation, which contrasts with earlier findings for multiplicative efforts. Players cut back on the effort with contest intensity equal to one, and exert alternative efforts instead. Accounting for solutions which have to be determined numerically, a Nash equilibrium selection method is provided. For illustration, an example with maximum two efforts for each player is provided. Equilibria are shown where both players choose both efforts, or one player withdraws from its most costly effort. Both players may collectively prefer to exclude one of their efforts, though in equilibrium, they may prefer both efforts. When all contest intensities are equal to one or larger than one, only the one most cost-effective effort is exerted, due to the logic of linear or convex production. Rent dissipation increases in the contest intensity, and is maximum when the players are equally advantaged determined by unit effort cost divided by impact. (shrink)

This article considers an asymmetric contest with incomplete information. There are two types of players: informed and uninformed. Each player has a different ability to translate effort into performance in terms of the contest success function. While one player’s type is known to both players, the other is private information and known only to the player himself. We compare the Bayesian Nash equilibrium outcome of a one-sided private information contest to the Nash equilibrium with no private information, in which both (...) players know the type of the other player. We show conditions under which uncertainty increases the investment of the uninformed player and the rent dissipation of the contest, while decreasing the expected net payoff of the informed player. In addition, we consider conditions under which the informed player—before knowing his own type—prefers that the uninformed player knows his type. Moreover, we show conditions for the existence/non-existence of equilibrium in a two-stage contest in which the informed player declares his type (or does not declare) in the first stage and in the second stage the two players play according to the information available to them. (shrink)

The various institutional reforms which have led since the end of the 70s to the « privatisation of currency » have formed the main base on which the subsequent power of finance has been built, and, concurently, the dismantling of Welfare could take place. Core of this was the so-called autonomy of central banks, as their « umbilical cord » to national treasuries was severed. From then on, deficit financing and « keynesian » social expenditures became near-impossible. Emphasizing the autonomy (...) of central banks from politics was mostly an institutional mutation meant to free monetary policies from social pressure and make it totally subordinate to rent creation and financial accumulation. No wonder then that « securitisation » of the public debt closely followed on the prohibition to deficit financing social expenditures. And then the outcome was not a reduction, but an explosion of public debt! And as debt servicing becomes a principal item on the budget, the « excessive costs » of welfare provisions is blamed, and a further break-down of social services is called for. It is in the same vein that price inflation is controlled, but assets inflation and speculative bubbles dominate « developped » economies. Meanwhile, in order to compensate for increasing income inequalities and diminishing welfare benefits, an exacerbated form of « private households deficit spending »has come into its own, as witnessed by the subprime crisis and mounting credit card defaults. So we are moving from an entitlements-based provision of social goods to one based on the pure logic of capital and its cycles. The only way out lies in the resocialisation of currency, profound fiscal reforms, the demise of rent-seeking, and the institution of an universal « basic income ». (shrink)

This book represents a considerable revision and expansion of Public Choice II. Six new chapters have been added, and several chapters from the previous edition have been extensively revised. The discussion of empirical work in public choice has been greatly expanded. As in the previous editions, all of the major topics of public choice are covered. These include: why the state exists, voting rules, federalism, the theory of clubs, two-party and multiparty electoral systems, rent seeking, bureaucracy, interest groups, (...) dictatorship, the size of government, voter participation, and political business cycles. Normative issues in public choice are also examined including a normative analysis of the simple majority rule, Bergson–Samuelson social welfare functions, the Arrow and Sen impossibility theorems, Rawls's social contract theory and the constitutional political economy of Buchanan and Tullock. (shrink)

Bastiat emphasized the institutional infrastructure of a market economy and the principle of spontaneous order. He began with first principles — the primacy of property and consent — and derived the legitimate functions of government. As a pioneer in constitutional political economy, he examined the relation between economics and politics, employed methodological individualism, and extended the exchange paradigm to collective choice. He showed that the attenuation of economic liberty in the pursuit of distributive justice under majoritarian government would lead to (...) rent-seeking, corruption, and politicization of economic life.Bastiat met l’accent sur l’aménagement institutionnel de l’économie de marché et sur le principe de l’ordre spontané. Son analyse débute avec les principes premiers — la primauté de la propriété et du consentement — et il infère de ces principes les fonctions légitimes du gouvernement. En tant que pionnier de l’économie politique constitutionnelle, il examine les liens entre la sphère économique et la sphère politique, a recours à l’individualisme méthodologique et étend le paradigme de l’échange aux choix collectifs. Il montre que l’érosion de la liberté économique qu’entraîne la recherche d’une justice distributive sous un gouvernement majoritaire mène à la recherche de rentes, à la corruption et à la politisation de la vie économique. (shrink)

Was Marxism a variety of German Idealist self-actualization in economic form? A deeply flawed blueprint for social engineering? A catechism for post-colonial insurgencies? the intellectual foundations of modern social democracy? In this wide ranging summation, Sullivan tackles the multi-tentacled reach of Marx's legacy, and explores both the limits and the lasting significance of his ideas. Structured around three obstacles to freedom - poverty, corruption and banality - the work engages both Marx and his critics in addressing unresolved issues of the (...) current social and political order. As such, the work, after two introductory chapters, leaves behind Marxology and its familiar cast of characters (Bernstein, Kautsky, Adorno, Lukacs, Fanon, Horkheimer, Marcuse, etc.) to address both neo-Marxist and non-Marxist interpretations of these obstacles. These include growth-led poverty alleviation, human capital theory, current debates on rent-seeking and public choice theory, weaknesses in Frankfurt School approaches to mass culture, and emerging trends in cyberspace and leisure consumption. Marx for a Post-Communist Era is credited as a foundational theoretical source in a wide range of contemporary studies. Some examples include a government-sponsored anti-corruption report in Peru, a study of neoliberalism and education reform in the UK, and an urban planning essay on museum spaces and the public good. (shrink)

Significant “guestworker” immigration occurs when the state lacks the capacity to inhibit rent-seeking by private interests that benefit from imported labor. Policies allowing imported labor result in government subsidies for employers’ profits. These subsidies are usefully conceived as rents. A developmentalist state will constrain the creation of such rents, especially because imported labor carries long-term costs not borne by employers and inhibits productivity growth and positive structural change. A clientelist state falls prey to this type of rent- (...) class='Hi'>seeking because of a weaker institutional capacity for creating conditions that make alternative solutions feasible and profitable for employers. (shrink)

An equal and high-quality partnership between public and private sectors is essential to the sustainable development of public–private partnership projects. However, in the special social circumstance in China, the public sector has a strong voice in PPP projects. According to the existing research on PPP project failure, the government's dishonest performance and negative cooperative attitude and the private sector's speculative behavior of concealing information will lead to termination or even failure of project. The attitude and behavior that reflect the relationship (...) orientation of public sector may determine whether the private sector adopts an opportunistic behavior. However, few studies have revealed the mechanism of relationship orientation on opportunism in PPP projects. This paper proposes the connotation of the public sector's relationship orientation and designs a measurement scale from three aspects: emotional relationship orientation, instrumental relationship orientation, and rent-seeking relationship orientation. Based on the data from large construction enterprises, financial institutions and investors, and scholars with practical experience in PPP projects, this paper explores the mechanism of the public sector's relationship orientation on the private sector's justice perception and opportunistic behavior by using the structural equation model. The results show that the public sector's relationship orientation significantly affects the formation and development of the private sector's justice perception and opportunistic behavior, justice perception plays a mediating role in the process of relationship orientation acting on opportunistic behavior, and the instrumental relationship orientation is more conducive to reducing the opportunistic behavior. The results provide new ideas for changing the public sector's concept and attitude and regulating behavior in PPP projects. (shrink)

The release of the Final Report of the Lyons Inquiry into Local Government in England, entitled Place-shaping: A shared ambition for the future of local government (Lyons Inquiry into Local Government) was a significant milestone in the debate on local government reform. Place-shaping is a sophisticated piece of rhetoric and policy making and can be seen to have relevance far beyond its own jurisdiction. This paper traces its theoretical antecedents alongside developments in the debate on local government in England. Despite (...) its broad appeal, we argue that problems familiar to local government such as rent-seeking and cost shifting will be heightened rather than resolved with any take-up of the place-shaping agenda. (shrink)

This book investigates the extensive and growing economic inequalities that characterize the affluent market societies in which we currently live. It uses insights both from political philosophy and the new science of happiness to make the case for more just alternatives. We diagnose the damaging impact that existing inequalities have on our well-being. We draw on philosophical, psychological, social scientific and other insights to diagnose what has gone wrong in our highly unequal and frequently unhappy societies. Combining the approaches both (...) of philosophers such as Jean-Jacques Rousseau, Adam Smith, Georg Wilhem Friedrich Hegel, John Rawls and Philip Pettit and analyses from political economists, we uncover the economic, social and political mechanisms that create and perpetuate income and wealth inequality. The key claim is that wealthy elites engage in rent seeking and opportunity hoarding and shape our social, economic and political structures in ways that benefit them and harm the rest. We assess important insights from the new science of happiness to assess the impact of inequality on the well-being of the poor, the middle class and the rich. We specifically examine the role of key emotions, such as shame (amongst the poor), envy and admiration (towards and for the rich). We discuss which emotional narratives serve to justify and entrench excessive inequalities in income and wealth. The result is an explanation of the emotional regime that characterizes our capitalist societies and that perpetuates the unfair gap between the extravagance of the rich and the misery of the poor. We conclude with policies and proposals to re-shape this emotional regime in the interests of justice and solidarity. (shrink)

Does anyone have a monopoly on God? Can religion be bought or sold? Why do we pay priests? How do we limit religious conflicts? And should states get involved in matters of faith? "Faithonomics" shows that religion should be analyzed as a market similar to those for other goods and services, like bottled water or haircuts. It is about religion today, but Brekke shows us that there have always been religious markets, all over the world, regulated to a greater or (...) lesser degree. He argues that state "control" over religious markets is often the cause of unforeseen and negative consequences. Many of today's problems like religious terrorism or rent-seeking by religious political parties, are easier to understand if we think like economists. Religious markets work best when they are relatively free, and religious organizations should be left to sell their products without unnecessary restrictions. We have no good reason to grant any one of them special privileges, political or financial."--book jacket front flap. (shrink)

Corporate bond appeared in 1992-1994 in Vietnamese capital markets. However, it is still not popular to both business sectors and academic circles. This paper explores different dimensions of Vietnamese corporate bond market using a unique and perhaps, most complete data set. State not only intervenes in the bond markets with its powerful budget and policies but also competes directly with enterprises. The dominance of state-owned enterprises and large corporations also prevents small and medium enterprises from this debt financing vehicle. Whenever (...) a convertible term is available, bondholders are more willing to accept lower fixed income payoff. But they would not likely stick to it. On the one hand, prospective bondholders could value the holdings of equity when realized favourably ex ante. On the other hand, the applicable coupon rate for such bonds could turn out negative inflation-adjusted payoff when tight monetary policy is exercised and the corresponding equity holding turns out valueless, ex post. Given the weak primary market and virtually non-existent secondary market, the corporate bond market in Vietnam reflects our perception of the relationship-based and rent-seeking behaviour in the financial markets. For the corporate bonds to really work, they critically need a higher level of liquidity to become truly tradeable financial assets. Updated entries in 2010 affirm the findings and conclusions. (shrink)

To judge from the rash of recent law review articles, it is a miracle that research with human subjects in the U.S. continues to draw breath under the asphyxiating heel of the rent-seeking, creativity-stifling, jack-booted bureaucrethics that is the current system of research ethics oversight and review. Institutional Review Boards, sometimes called Research Ethics Committees, have been accused of perpetrating “probably the most widespread violation of the First Amendment in our nation's history,” resulting in a “disaster, not only (...) for academics, but for the whole nation.” One member of the President's Council on Bioethics went so far as to assert, “There has been no greater damage to academic freedom in the United States in my lifetime. And my lifetime encompasses McCarthy and it encompasses political correctness, both.” Locked in the bureaucratic “iron cage” of IRB oversight, critics charge that researchers have been transformed into a vulnerable, exposed population, subject to domination, that has been likened in one case to a kind of “Tuskegee in reverse.”. (shrink)

Economic analysis is being applied by scholars to an increasing range of legal problems. This collection brings together some of the main contributions to an important area of this work, the economics of contract law. The essays and illuminating notes, questions, and introductions provided by the editor outline the Law and Economics framework for analyzing contractual relationships. The first two parts of the book present a number of useful concepts - adverse selection, moral hazard, and rent seeking - (...) and a general way of thinking about the economics of contracting and contract law. The remainder of the book considers a wide range of topics and issues. The recurring theme is that contracting parties want to assign the responsibility for adjusting to particular contingencies to the party best able to control the costs of adjustment. The adjustment problem is exacerbated by the fact that the parties might engage in various types of strategic behavior, such as opportunism, moral hazard, and rent-seeking. Many contract law doctrines can best be understood as attempts to replicate how reasonable parties might resolve this adjustment problem. (shrink)

This article provides an ISCT analysis of commercial bribery focused on transaction cost economics. In the language of Antitrust, commercial bribery is a form of vertical arrangement subject to the same efficiency analysis that has found other vertical arrangements potentially beneficial to consumers. My analysis shows that actions condemned as commerical bribery in the Honda case may well have benefited Honda's dealer network once promotional free riding and other forms of rent seeking by dealers are considered. I propose (...) that the term "commercial bribery" should be avoided until after an ISCT analysis shows that the community is likely to have been harmed. The term "third-party payments" is a more ethically neutral term with which to begin the analysis. (shrink)

In this article I reflect on the role of knowledge formation and knowledge acquisition in my personal life, starting from my childhood in traditional African context, then dealing with my period as a student and a freedom fighter, and finally during my leadership of Uganda, initially in need of drastic recovery and development, later in need of stable concentration on economic development rather than political rivalry and rent-seeking.

Most models of the formation of political coalitions use either Euclidean spaces or rely purely on game theory. This limits their applicability. In this article, a single model is presented which is more broadly applicable. In principle any kind of set can be used as a policy space. The model is also able to incorporate different kinds of party motivations: both rent-seeking and idealism. The model uses party preferences and power to identify stable coalitions and predict government policy (...) as well as to indicate which member of the opposition will be able to break up the governing coalition if no stable coalition exists. In the latter case it will also indicate on which issue the government is likely to split. Parties may have preferences over issues such as the composition of cabinet and/or the governing coalition as well as the more traditional issues of government formation. The model also provides a rationale for log-rolling. (shrink)

A cross sectional study of a sample of Australian accounting students during 2011 is used to test whether the relationship concept of guanxi is accepted as a social networking concept across cultures. While favour-seeking guanxi appears to be equally important across cultural groups (as a universal set of values), its negative variant, rent-seeking guanxi continues to be sanctioned to a greater extent by students holding temporary visas from Mainland China. Contrary to the findings of Fan, Woodbine, and (...) Scully (2012) involving Chinese auditors, this study of Australian and Chinese students did not identify favour-seeking guanxi as a factor influencing ethical judgment, whereas rent-seeking guanxi was strongly significant as a predictor of judgment making for Australian students. Major concerns are expressed about the need to sensitize Chinese students to make them more aware of unethical practices prevalent in their home country. These findings have significant implications for educators delivering ethics courses to cohorts that include international students as well as the professional bodies involved in designing development programs. (shrink)

This article tries to provide a dynamic interest group theory. Using the economic method of the 'homo economicus' demand for and supply of policy catering to the needs of pressure groups are analysed. Central are the notions of information and organisation costs that face latent groups treatened by already existing groups. These notions permit to integrate the existing theories on pressure group into one global dynamic theory. The economists' rent seeking theory and the political scientists' pluralism and neo-corporatism (...) can thus be understood as stages in a continuing process. (shrink)

The aim of this work is to analyse the influence of sociocultural factors on corruption levels. Taking as starting point Husted (J Int Bus Studies 30:339–359, 1999) and Graeff (In: Lambsdorff J, Taube M, Schramm M (eds) The new institutional economics of corruption. Routledge, London, 2005) proposals, we consider both the interrelation between cultural dimensions and the diverse expressions of social capital with corruption. According to our results, the universalistic trust (linking and bridging social capital) constitutes a positive social capital (...) that is negatively linked to corruption. In contrast, the particularistic levels of trust (bonding) can constitute a negative social capital directly related to corruption levels. Furthermore, cultures which are favourable to the legitimation of dependency relations and the formation of closed particularistic groups (power-distance and community factors) create a breeding ground for the development of these amoral rent-seeking structures. (shrink)

The purpose of the Chinese Environmental Information Disclosure System is to protect the environment through public participation and public opinion. This paper uses data from listed Chinese companies in heavily polluted industries from 2008 to 2013 to examine the influence that corporate political connection has on corporate environmental information disclosure level. The results show that firstly, while environmental disclosure level has improved over time, negative information that reflects the real status of environmental management has also been concealed. Secondly, although corporate (...) political connection can influence companies to more actively disclose environmental information, it can also mask political rent-seeking in the guise of protecting the environment. This is especially prevalent in state-owned enterprises where political connection has a significant positive impact on CEID in the eastern and western parts of China. If political connections influence CEID, it will be difficult to improve the quality of environmental disclosure and provide useful information for decision makers. There is an urgent need to standardize and strictly regulate listed companies’ system for environmental information disclosure. (shrink)

Our paper draws attention to a neglected channel of corruption—the bribe payments by state-owned enterprises. This is an important phenomenon as bribe payments by SOEs fruitlessly waste national resources, compromising public welfare and national prosperity. Using a large dataset of 30,249 firms from 50 countries, we show that, in general, SOEs are less likely to pay bribes for achieving organizational objectives owing to their political connectivity. However, in deteriorated institutional environments, SOEs may be subjected to potential managerial rent-seeking (...) behaviors, which disproportionately increase SOE bribe propensity relative to privately owned enterprises. Specifically, our findings highlight the importance of fostering democracy and rule of law, reducing prevalence of corruption and shortening power distance in reducing the incidence of SOE bribery. (shrink)

This article examines whether (1) government intervention causes bribery (or corruption) as rent-seeking theory suggested; (2) a firm’s perceived benefit partially mediates the relationship between government intervention and its bribing behavior, as rational choice/behavior theory suggested; and (3) other firms’ bribing behavior moderates the relationship between government intervention and a firm’s perceived benefit. Our study shows that government intervention causes bribery/corruption indeed, but it exerts its effect on bribery/corruption through the firm’s perceived benefit. In other words, a firm’s (...) perceived benefit fully mediates the relationship between government intervention and its bribing behavior. We also find that other firms’ bribery positively moderates the relationship between government intervention and a given firm’s bribery. This study partly proves that firms are rational actors. Potential benefit encourages them to practice bribery. Besides, this research also supports the rent-seeking view of bribery/corruption, which argues that government intervention is a source of bribery/corruption. However, we have also identified that only those government interventions that will create “rent” can cause bribery/corruption. (shrink)

Islamic financing instruments can be categorised into profit and loss/risk sharing and non-participatory instruments. Although profit and loss sharing instruments such as musharakah are widely accepted as the ideal form of Islamic financing, prior studies suggest that alternative instruments such as murabahah are preferred by Islamic banks. Nevertheless, prior studies did not explore factors that influence the use of Islamic financing among non-financial firms. Our study fills this gap and contributes new knowledge in several ways. First, we find no evidence (...) of widespread use of Islamic financing instruments across non-financial firms. This is because the instruments are mostly used by less profitable firms with higher leverage. Second, we find that profit and loss sharing instruments are hardly used, whilst the use of murabahah is dominant. Consistent with the prediction of moral-hazard-risk avoidance theory, further analysis suggests that users with a lower asset base are associated with murabahah financing. Third, we present a critical discourse on the contentious nature of murabahah as practised. The economic significance and ethical issues associated with murabahah as practised should trigger serious efforts to steer Islamic corporate financing towards risk-sharing more than the controversial rent-seeking practice. (shrink)

This article draws on key models of monitoring and blockholding articulated in the incomplete contracts theory of the firm. Under incomplete contracts theory, different governance systems have incentive structures that entail different tradeoffs—tradeoffs between ownership concentration and liquidity, between monitoring and management initiative, and between private rent-seeking and activity benefiting shareholders as a group. The tradeoffs delimit opportunities for productive cross-reference. More specifically, blockholder systems, such as those in Europe, subsidize monitoring by permitting blockholders to reap private benefits (...) of control through self-dealing and insider trading. Market systems, such as those in the United States and Britain, regulate such private rent-seeking toward the end of maintaining an institutional framework that supports diffuse share ownership and liquid trading markets. It follows that a legal framework conducive to blockholding may be ill-equipped to foster dispersed equity ownership and thick trading markets and that a legal framework conducive to liquid trading markets may have properties that discourage blockholding. This gives rise to questions for law reform agendas on both sides of the Atlantic. In the United States, proponents ask for deregulation of controls on institutional investors, looking to encourage blockholding and more effective monitoring. In Europe, proponents ask for stronger securities regulation, looking to encourage deeper trading markets. This article suggests that each reform program may lead to disappointing results because neither assures conforming adjustments to the pertinent actors’ incentives. Alternatively, strict reforms that materially change prevailing incentive patterns could perversely destabilize workable arrangements without assuring the appearance of more effective alternatives. (shrink)

We investigate the entrepreneurial opportunities and ethical dilemmas presented by technological turbulence. More specifically we investigate the line between Baumol’s [J. Polit. Econ. 98 (1990) 893] productive (e.g. innovation), unproductive (e.g. rent seeking) and destructive (e.g. criminal) entrepreneurship through three examples of Internet innovation – spam (destructive), music file sharing (unproductive), and Internet pharmacies (potentially productive). The emergence of accessible Internet technologies, under present norms, has created the potential for all three entrepreneurial activities. Because of the propensity for (...) self-serving biases and for bending the rules, the need for creativity in overcoming obstacles and overall liabilities of newness, entrepreneurs are likely to challenge established industrial morals and laws. Unlike new entrants, incumbents must abide by the currently accepted norms, and thus suffer from “liabilities of oldness”. The challenge for new entrants is to change sociopolitical legitimacy, whereas incumbents need to defend the established norms. We discuss competitive and other issues that result from technological turbulence and innovation. (shrink)

Social capital can serve as informal governance in weak investor-protection regimes. Using hand-collected data on entrepreneurs’ political connections and firm ownership, we construct several original measures of social capital and examine their effect on the performance of entrepreneurial firms in China after their initial public offerings. Political connections or a high percentage of external investors tend to enhance firm performance, but intragroup related-party transactions commonly lead to performance decline. These forms of social capital have a strong influence on the performance (...) of Chinese firms, whereas formal governance variables such as board size or board independence have little effect. Although social capital may serve as an informal governance mechanism and effectively substitute for formal governance mechanisms in an emerging market, this role of social capital raises several ethical concerns, notably the development of rent-seeking and crony capitalism. (shrink)

In the 1970s, deep ecologists developed a radical normative argument for ‘ecological consciousness’ to challenge environmental and human exploita- tion. Such consciousness would replace the Enlightenment dualist ‘illusion’ with a post-Enlightenment holism that ‘fully integrated’ humanity within the ecosphere. By the 2000s, deep ecology had fallen out of favour with many green scholars. And, in 2014, it was described as a ‘spent force’. However, this decline has coincided with calls by influential advocates of ‘corporate social and environmental responsibility’ (CSER) and (...) ‘green growth’ (GG) that urge market actors to ensure voluntarily that social and environmental ‘problems are addressed holistically’. Given that CSER and GG have also been associ- ated with rent seeking, privatisation and reducing incomes of the poor, could it be that some of deep ecology’s once radical ideas today serve to legitimate forms of exploitation that they once decried? A critical realist perspective can problematise deep ecology’s highly normative response to exploitation and alienation. By settling ontological questions in favour of holism and promoting moral voluntarism, deep ecology failed to address how actors with different interests might adopt green ideas. This blind spot can be cured by focusing instead on the active deployment of ethics, morality, values, beliefs, ideas and knowledges by political actors in historically specific contexts. Both critical normative and critical realist modes of engaging with environmental values are important; however, at a time when holism and voluntarism are gaining influence, critical realism offers helpful insight into the uses and abuses of such values. (shrink)