Rent extraction[3] (Chinese: 抽租)[4] is a notion formulated by American jurist Fred S. Mcchesney (1948–2017)[5] in his 1987 essay Rent Extraction and Rent Creation in the Economic Theory of Regulation.[6] It refers to the phenomenon by which entrepreneurial politicians take advantage of the threat of implementing new regulations to obtain political support from interest groups that want to be free from regulatory interference. This strategy is in particular useful when a group has made specific capital investments that can be expropriated in the political process.[7]
| Initiator | Fred S. Mcchesney[1] |
|---|---|
| Introduced | 1987 |
| Origin | Rent Extraction and Rent Creation in the Economic Theory of Regulation[2] |
| Rent extraction | |||||||
|---|---|---|---|---|---|---|---|
| Chinese | 抽租 | ||||||
| |||||||
"Rent extraction" means the ability of lawmakers to squeeze payments (i.e. "rents") in some form in exchange for favorable legislation.[8] The term presents a conscious, welfare maximization strategy by individual statespersons.[9] It emerges when political decision makers derive benefits from the rents they generate. And the beneficiaries of rent extraction can also be local governments at all levels and the private individuals.[10]
Rent extraction, together with rent creation and rent seeking, determines the extent and distribution of rents. However, the three are distinct and rent extraction is arguably the most important of the three, since the other two are ultimately motivated by rent extraction.[11]
Hillman and Katz found that there was a collision between the benefits of lower and upper level officials when it came to rent extraction. The more rent extraction that occurs at the lower levels of governance, the less the upper officials can "harvest". As a result, officials at the upper levels of rent collection have an incentive to adopt rules and regulations that limit the types of rent collection allowed by lower-level officials.[12]
See also
editReferences
edit- ^ Randall G. Holcombe (19 July 2018). Political Capitalism: How Political Influence Is Made and Maintained. Cambridge University Press. pp. 123–. ISBN 978-1-108-47177-0.
- ^ Roger D. Congleton; Arye L. Hillman; Kai A. Konrad (1 August 2008). 40 Years of Research on Rent Seeking 2: Applications: Rent Seeking in Practice. Springer Science & Business Media. pp. 313–. ISBN 978-3-540-79185-0.
- ^ Thomas J. DiLorenzo (Jul 20, 2012). "Organized Crime: The Unvarnished Truth About Government" (PDF). Mises Institute.
- ^ Martin Wolf (Jun 16, 2021). "U.S. Should Abandon False Promises of Protectionism". Financial Times.
- ^ Wu Shenggong (2006). The construction of service-oriented government. Social Sciences Literature Press. ISBN 978-7-80230-190-0.
- ^ Hu Xining (16 January 2018). Contemporary Western School of Economics. Sonbook Publishing Industry Company Limited. pp. 458–. ISBN 978-986-492-737-1.
- ^ Henry N. Butler, Jonathan R. Macey. Cornell Law Review (14 September 1994). "Health Care Reform: Perspectives from theEconomic Theory of Regulation and the EconimcTheory of Statutory Interpretation". Yale Law School.
- ^ Cornell Law Review (28 November 2009). "Section of Taxation - Federal Bar Association" (PDF). Federal Bar Association.
- ^ Fred S. McChesney (1997). Money for Nothing: Politicians, Rent Extraction, and Political Extortion. Harvard University Press. pp. 3–. ISBN 978-0-674-58330-6.
- ^ Michael Reksulak; Laura Razzolini; William F. Shughart (1 January 2013). The Elgar Companion to Public Choice. Edward Elgar Publishing. pp. 316–. ISBN 978-1-84980-603-9.
- ^ Roger D. Congleton; Bernard N. Grofman; Stefan Voigt (8 January 2019). The Oxford Handbook of Public Choice. Oxford University Press. pp. 546–. ISBN 978-0-19-046973-3.
- ^ Young Back Choi (29 July 2011). Institutional Economics and National Competitiveness. Routledge. pp. 49–. ISBN 978-1-136-64883-0.